Challenges Of Vat Administration In Ethiopian Revenue And Custom Authority (ERCA) In Case Of Jimma

Abstract

Taxes are important sources of public revenue. Value Added Tax (VAT) is a tax on consumer expenditure. It is collected on business transactions and imports. A taxable person can be an individual, firm, company, as long as such a person is required to be registered for VAT. Even if VAT is one of the most important sources of revenue and it’s in Ethiopia is infant Most developing countries are currently dependent more on external financial resources to fund their development activities. The tax contribution to GDP is very less as compared to developed countries. The objective of this study is to investigate challenges of VAT administration in the last five year at the Jimma Branch of the Revenue and Customs Authority. The study used descriptive and analytical research design. VAT Register tax payers were the target population of this study. A sample of 212VAT Register tax payers were drown from the population using simple random sampling technique (lottery) method using their register number taken from the authority. The study used primary and secondary data sources. Primary data were collected through questionnaire and secondary data were collected from reports and manuals of Ethiopian Revenue and Customs Authority (ERCA) Jimma branches. Quantitative data analysis was supported by SPSS. Descriptive Statistics, correlation and multiple linear regression analysis were used to analyze the survey and thematic analysis was done with good interviews. This result also leads us to state a Complex tax system has significant impact on VAT administration. Cultural backgrounds have significant impact on VAT administration. Low awareness about taxation and government spending also affect VAT Administration in the study area. Respondents who have poor awareness about government spending rarely comply tax. This shows that the authority should empower taxpayers regarding the role of tax in national development.